Blackmail And A Briefcase Of Bitcoin

The anti-cashists are right about one thing. A briefcase full of paper cash is a dirty, inefficient way to move money around.

Upon hearing the news that a hacker had seized presidential nominee Mitt Romney's prior year tax returns and was asking for $1,000,000 to destroy them, you could be excused for thinking that you had stumbled into a Dr. Evil film. But, this blackmailer was demanding payment to be made in the cryptocurrency bitcoin, not dollars. A bitcoin receiving address was provided so that the public could monitor the progress.

But, is blackmail really an illegitimate act? In the fictitious case of Dr. Evil's demands, he was threatening a violent crime as a consequence. With the Romney tax hacker, the consequence of merely revealing the truth is not a crime. If the alleged hacker(s) acted alone to break in and obtain the information from PricewaterhouseCoopers, rather than discovering the information, that break-in would of course be considered a criminal act. However, the act of blackmail itself is a separate issue.

Professor Walter Block of Loyola University New Orleans reflects on the old axiom that "the truth shall make you free" and says that a blackmailer is simply setting the truth free to do whatever good or bad it is capable of doing. In his book Defending the Undefendable, Block suggests:

We will find, however, that the case against the blackmailer cannot stand serious analysis; that it is based upon a tissue of unexamined shibboleths and deep philosophical misunderstandings.

What, exactly, is blackmail? Blackmail is the offer of trade. It is the offer to trade something, usually silence, for some other good, usually money. If the offer of the trade is accepted, the blackmailer then maintains his silence and the blackmailee pays the agreed-upon price. If the blackmail offer is rejected, the blackmailer may exercise his rights of free speech and publicize the secret. There is nothing amiss here. All that is happening is that an offer to maintain silence is being made. If the offer is rejected, the blackmailer does no more than exercise his right of free speech.

Professor Block also posits some good effects of blackmail, such as diminishing real crime (robbery, murder, rape) because it increases the penalty associated with crime if a criminal has to share the loot or pay up to avoid the reporting of an 'anonymous' tip. The legalization of blackmail could also have a beneficial effect on non-aggressive actions that are generally at odds with societal mores such as sadomasochism and adultery, according to Block.

Vitalik Buterin of Bitcoin Magazine extends that thinking to the potential beneficial effects on governments and the corporate world:

Although the tools of communication and financial privacy are granting the small thieves an unprecedented ability to carry out their business with impunity, the large thieves that have so far been able to hide in the bureaucratic shadows of governments and large corporations are finding themselves more and more thrown into the limelight. This is the world we are moving towards: one that is perhaps more anarchic, and in some respects more dangerous, but one that is at the same time more just.

It is not yet known whether the threat to disclose tax return information is a real threat, but I suppose we will all know on the expiration date of September 28th. For its part, PricewaterhouseCoopers stated "we are working closely with the United States Secret Service, and at this time there is no evidence that our systems have been compromised or that there was any unauthorized access to the data in question."

Transactional privacy in the digital age is a double-edged sword. It has the potential to liberate individuals from many aspects of political tyranny but it also creates new challenges as the physical cash drop-off point is no longer a deterrent to getting caught. Regulating a bitcoin is like regulating an air guitar. The only thing we know for certain is that it's not going away.